Financial advisors rarely bring up “charity” during client meetings. By the time you've covered erosion to portfolios from market losses, taxes and fees, calling attention to one more way to reduce their net worth doesn't seem like a good idea.
But you should consider adding a client's benevolent intentions to your list of topics to be discussed. Generally the wealthier your client is, the more likely the subject will be of interest to him or her. By serving as the proactive point man, you can help your client give in the most efficient manner — plus, get yourself an “in” with the charity.
Look Up Before You Hook Up
From the IRS to the Department of Homeland Security, the feds are giving charities and donors the once-over, searching for everything from tax fraud to terrorist activity. By knowing where and what to look for, you can prevent your client's good intentions from becoming a wiped-out tax deduction — not to mention earning embarrassing attention from a government agency and the attendant media.
Where is the Money Going?
The first concern is how much of the money goes to the actual works of the group. Make sure you're comparing apples to apples — a food bank, for example, will typically have lower overhead than a modern art museum. National nonprofits can be profiled at charitywatch.org.
The next good-to-know ratio is where and what is going to top staff and consultants. All IRS-sanctioned charities are required to make their Form 990 available for inspection. Contained therein is data on salaries and payments to independent contractors.
Finally, ask if donations are going around the world, or into your own backyard.
What Kind of Charity are You Giving to?
Donating cash or assets to public charities (like universities, hospitals and religious organizations) allows your client to deduct up to 50% of the value from his annual adjusted gross income. But gifts to private charities (veterans groups and fraternal societies, among others) will only allow for up to 30% of the value to offset taxable income in a given year. You can find out which groups will give your client the greatest tax benefit by checking out Publications 526 and 78 at irs.gov.
Helping Others — and Yourself
Once your client settles on a deserving organization, you have a window of opportunity to become the “go-to” guru for the charity. Here's how to leverage your initial contact into a relationship that is just as lucrative to you as it is the charity.
Plant the seeds to sponsor a dinner/seminar to the “friends” of the organization. The director of the charity can speak for a few minutes on what they've accomplished recently, and where the biggest need is for the future. Then you (or an expert from your firm) can spend an hour going over the different ways potential donors can demonstrate their compassion, and slash their individual income taxes at the same time.
Don't Get Greedy
Try to donate or discount the cost of your services to the charity whenever possible. Your generosity will be appreciated by the board members and large donors, and may give you the inside track at managing the likely larger personal assets they haven't donated. If you serve on the board of a nonprofit, you should exclude yourself from managing (and profiting from) the nonprofit's assets. Dipping your pen in the charity inkwell is at best a conflict of interest.
The way to a billionaire client's assets is through his heart. Want to know which causes a particular high-net-worth individual holds near and dear? Go to the ever-helpful guidestar.org, and run Richie Rich's name through their database. You'll get back a listing of all the nonprofit board and trustee positions he currently holds.
Charity Is Its Own Reward
Finally, don't be disappointed if your efforts “only” raise money and awareness for a particular cause, rather than steering a big chunk of assets back under your management. The more visible your self-interest is, the less likely it will be served. And besides, if this market doesn't turn around pretty quick, you soon might find yourself relying on the kindness of strangers, too.